The Business Value in Enterprise 2.0

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Recently some of regulars have done a great job of focusing in on how Enterprise 2.0 differs from Web 2.0 and why those differences matter.

We seem to be moving toward a consensus on what the key characteristics of social software in the enterprise context are. What we haven’t done so well is make the business value case-how does it help organizations become more productive and competitive?

The answer, I believe, is hiding in plain sight in an article called Competitive advantage from better interactions by Scott C. Beardsley, Bradford C. Johnson, and James M. Manyika in the 2006 Number 2 issue of McKinsey Quarterly. (reg. required). Both Dennis Howlett and Rod Boothby have referred to it in recent posts, but the article is so essential to understanding the business value of social software that I think it is worth a closer look. The key points are these:

  • For many employees today, collaborative, complex problem solving is the essence of their work. These “tacit” activities-involving the exchange of information, the making of judgments, and a need to draw on multifaceted forms of knowledge in exchanges with coworkers, customers, and suppliers-are increasingly a part of the standard model for companies in the developed world.
  • Employees like managers and salespeople, whose jobs consist primarily of such activities, now make up 25 to 50 percent of the workforce. In insurance companies, tacit interactions now constitute the primary activities of 63 percent of the workforce. The proportion is 60 percent in securities companies, 70 percent in health care, and 45 percent in retailing. Even in utilities, 30 percent of the employees undertake tacit work.
  • Companies have traditionally boosted their productivity by improving the efficiency of transformational activities (like the extraction of raw materials) or of transactions (for instance, the work of the clerks in the accounts-payable function). But, the old strategies for
    efficiency improvements don’t apply to employees whose jobs mostly involve tacit interactions; instead, a company must boost these workers’ productivity by making them more effective at what they do.
  • To achieve that goal, companies must alter the way they craft strategies, design organizations, manage talent, and leverage technology.

The authors of the McKinsey article go into some detail about each of these elements but here is some of what they say about technology:

  • Companies will increasingly need to deploy technology that makes shared data, information, and expertise available in real time; to offer decision support tools that help workers involved in tacit interactions create insights from data and analyses and that enhance the context and information that interactions require; to improve the ability of employees, customers, and suppliers to interact; and to offer effective collaboration tools for multiparty work flows.
  • Many of the technologies and tools that tacit workers are going to use will promote the collaborative and dynamic pursuit, capture, and sharing of knowledge and will allow for more video, audio, and graphics to facilitate remote interactions and broader access to scarce expertise. Tools based on search capacities, collaborative approaches to capturing and organizing knowledge, and new digital-learning channels are likely to emerge.
  • Executives will have to focus on deploying work-group-centric tools that are easy to set up and tear down as projects and strategic experiments come and go. They will also have to find ways of connecting these tools easily to preexisting interaction platforms. In addition, the issue of information overload must be addressed: already, Microsoft and others are trying to help tacit workers filter data from interactions more successfully and thereby reduce the burden of the excess information created when companies manage interactions (and their rate of increase) improperly.
  • Managing in an environment where most workers mainly participate in interactions will upend the greater part of what senior management has learned over the past half century. But the opportunity to create new forms of competitive advantage is clear for companies that take a new approach. The time to start is now.

In other words, Enterprise 2.0 is not simply a new kind of technology looking for a market as some skeptics have suggested, it is technology aimed squarely at pushing enterprises across the next frontier of productivity improvement and to build competitive advantage by helping employees perform more effectively in social interactions. That sure sounds a lot like business value to me.

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Jerry Bowles has more than 30 years of varied experience as a writer, editor, marketing consultant, corporate communications director and blogger. For the past 20 years, he has produced and written special supplements on new technologies for a number of magazines, including Forbes, Fortune and Newsweek.


The Business Value in Enterprise 2.0
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